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South Korean cryptocurrency magnate Do Kwon made his first appearance in a Manhattan courtroom after the co-founder of bankrupt Terraform Labs was extradited from Montenegro on Tuesday to face criminal charges in the US.
A new indictment unsealed Thursday adds a new count of money laundering to the eight original charges announced last year against Kwon — including securities, commodities and wire fraud — over the 2022 collapse of Terraform Labs, which led to a $40 billion implosion of TerraUSD and TerraUSD. Luna Tokens.
The latest indictment alleges that Kwon, 33, made numerous false disclosures and lied to investors, regulators and via social media about a range of crypto products and platforms connected to Terraform Labs. The indictment covers alleged conduct between 2022 and April 2024 and references wire and crypto transfers of more than $10,000 in “criminally acquired property.”
“Kwon’s engineered financial world was built on lies and manipulative and deceptive techniques used to deceive investors, users, business partners and government agencies regarding Terraform’s activities,” the indictment said.
“Behind the scenes, Terraform’s core products did not work as Kwon advertised and were manipulated to create the illusion of a functioning and decentralized financial system to lure investors,” it added.
The collapse of the TerraUSD coin caused an unprecedented crash in the crypto markets and led to a South Korean investigation into Kwon. He was previously accused of fraud and violating capital markets law in his home country, sparking an international manhunt after authorities failed to locate him.
Kwon was eventually arrested in Montenegro in 2023 after he was discovered trying to travel to the United Arab Emirates, which does not have an extradition treaty with the US, using a forged Costa Rican passport. US criminal charges against him were unveiled hours later.
Montenegro extradited Kwon to US officials and FBI agents on Tuesday at an airport in Podgorica, the country’s capital. South Korea had also requested his extradition.
Kwon has previously denied wrongdoing and entered a plea of not guilty during a brief court hearing on Thursday. Attorneys for Kwon did not immediately respond to a request for comment.
If convicted on all charges, he faces a maximum prison sentence of 130 years. His next court appearance is scheduled for January 8.
U.S. Attorney General Merrick Garland said Thursday: “Do Kwon will now be held accountable in a U.S. courtroom for, as alleged in court documents, his elaborate schemes involving Terraform’s cryptocurrencies, which resulted in more than $40 billion in investor losses .”
TerraUSD was one of the largest stablecoins – crypto tokens pegged to real assets; in this case the US dollar – at the moment of its collapse.
The collapse of TerraUSD and an affiliated digital coin, luna, marked the start of a brutal year for cryptocurrencies almost overnight, culminating in the demise of FTX and its founder Sam Bankman-Fried in late 2022. Bankman-Fried was convicted of fraud and is appealing a 25-year prison sentence he received in March 2024 for stealing $8 billion from crypto customers.
Kwon and Terraform Labs were found responsible for fraud in April in a civil case brought by the Securities and Exchange Commission, and the regulator in June ordered a $4.5 billion fine to be paid by the company and Kwon through a settlement. TerraForm Labs filed for Chapter 11 bankruptcy protection in January.